Investing in Tourism

by Michael Beckley (1997 Issue)

Tourism in Ontario supports close to 400,000 direct and indirect jobs and contributes almost $19 billion directly and indirectly to the Gross Provincial Product. The province accounts for two out of every three international visitors to Canada. For the past ten years, it has been the province's fourth largest export industry, generating some $4.3 billion in export earnings last year through visits from Americans and other international guests.

In one sense, tourism is booming in Ontario -- hotel occupancy rates, for instance, are up by 13 percent from three years ago and more Americans are coming across the border, attracted in part by the low Canadian dollar. But compared to other destinations, it's a different story: Ontario, which accounts for 40 percent of Canada's tourism industry, is not living up to its extraordinary potential.

WORLD MARKET SHARE
As a world travel destination, Ontario or Canada is not a particularly popular place to visit. In 1980, Canada ranked sixth in the world in terms of attracting visitors from beyond its borders -- today it has dropped back to 12th position, many millions of people behind France, which is number one, and even behind Hungary, which is fifth. Tourism in Asian countries is growing at a rate of eight percent per year. Even France and Germany are growing faster than Canada on a straight percentage increase basis.

Tourism is booming everywhere else. It is one of the fastest, if not the fastest growing sector of the domestic economies of countries the world over.

The World Travel and Tourism Council predicts that a decade from now tourism worldwide will account for 11.4 percent of direct and indirect GDP. The travel industry is expected to more than double in size -- generating some 126 million more jobs than exist today. By the year 2005, more than one in ten people in the global work force will make their living in a tourism-related job.

DESTINATION ONTARIO
Tourism is already a critical component of Ontario's economy, and it has the potential to be one of the chief drivers of its economic renewal. It is a concern that Canada is becoming less competitive in comparison to other nations. Ontario has the human, physical and financial resources to regain its prominence and maximize its potential as a travel destination. It is important that Ontario becomes a bigger player in the global market and turns around the province's $3.1 billion travel deficit.

Ontario is a well-kept secret. It is truly special, from snowmobiling and fishing in the North to the art galleries, museums, and theatres in Kleinburg, Niagara-on-the-Lake, and Stratford, to the wineries in southwestern Ontario and the water experiences of Niagara Falls and the Great Lakes.

For the most part, the facilities exist already, and if not, they are under construction -- like the expansion to the Metro Toronto Convention Centre, which will enter the big leagues upon completion two years from now. The Convention Centre will become one of the top 20 convention centres in North America.

What is needed to build Ontario tourism is more marketing partnerships and more creative, non-traditional marketing partnerships. We need to think in new ways and partner with new partners -- so that more international travellers will feel compelled to come to and to experience Ontario. And once they visit Ontario, they will want to stay longer and visit more often.

It is time to capitalize on how special Ontario is. The province has a competent, strong industry with many success stories. Today, however, the tourism business community in Ontario is at an important turning point. Actions over the next year will determine the health of our future.

GOVERNMENT SUPPORT
The provincial government is tightening its belt and offering less financial support to tourism as well as other industries. The key will be to spend existing monies more effectively.

The federal government has already stepped in. Just over a year ago, Prime Minister Chretien announced the formation of the Canadian Tourism Commission (CTC). The federal government has not only announced it will give priority to packaging and marketing Canada as a single destination, it has actually put some money behind the initiative.

With the announcement of the Canadian Tourism Commission came an increase in federal funding from $15 million to $50 million annually. Much of this $50 million is being used to leverage additional marketing money through partnerships with the provinces, major attractions, hotels and airlines, as well as strategic product groupings from small businesses.

The federal government initiative has given the industry the first thing it badly needed -- more money to leverage partnership opportunities in order to attract more visitors.

INDUSTRY INITIATIVES
The industry has some very clear ideas about how to position and partner itself. It wants to do this not as a client of the government, but as a partner with the government -- with the industry taking a leadership role.

The Ontario Tourism Council is not a tourism marketing body, but is a task force of tourism industry professionals with a mandate to develop a public/private sector partnership for tourism marketing. It has generated a broad level of support within the tourism industry.

The concept of a not-for-profit marketing corporation is outlined in the The Ontario Tourism Marketing Corporation Plan.

The provincial government has indicated that it is willing to work with the industry to develop a new strategic approach to tourism marketing in Ontario and within a tight time frame.

At a recent industry workshop, four different possible legal frameworks for a new tourism marketing organization were discussed:

1) Status Quo -- the marketing function remains with the provincial government. None of the workshop participants supported this.

2) Special Operating Agency -- The Canadian Tourism Commission and Tourism British Columbia are Special Operating Agencies. In a Special Operating Agency, the Minister with the tourism portfolio would delegate all decision-making power to the Board. There would be a close government reporting relationship, with the Board reporting to the Minister. The Minister would appoint the Directors of the Board. None of the workshop participants wanted an agency.

3) Marketing Authority -- created through its own Act of the legislature as a corporation. The Board would be elected or appointed from the tourism industry. The authority's annual business plan and audit are submitted to Cabinet. The Board has decision-making power. Saskatchewan went this route in 1994. About two percent of Ontario's workshop participants preferred this framework.

4) Not-for-profit Corporation -- with a fee-for-service contract with government. A full 98 percent of the Workshop participants felt that the not-for-profit legal framework is the most constructive for tourism marketing in Ontario. The not-for-profit corporation will have an elected Board of Directors, thereby increasing industry involvement in marketing decision-making; and it will be run as a competitive business where revenue can be retained and reinvested in marketing.

There are four main points that must be addressed with a sense of urgency: regaining market share, making business-driven decisions, increasing marketing effectiveness and investing public funds in tourism marketing.

1) Even though tourism is the world's largest and fastest growing industry, Ontario has been losing market share over the last decade. There is a need to reverse this trend immediately.

2) The Ontario Tourism Industry is maturing and therefore functions at its optimum when its decision-making is business-driven. An example of a recent tourism decision that was not business-driven and that hurt the tourism industry occurred during a government workers' strike which resulted in most of the travel information centres being closed.

3) The proposed Corporation with an industry-led Board, distanced from political influence and time-consuming bureaucratic processes, will achieve greater marketing effectiveness and consistency. The Corporation's marketing plans will be strategic and coordinated with the Canadian Tourism Commission's (CTC) marketing plans. This will provide the opportunity to leverage more partnerships with the Commission.

4) The Ontario Tourism Council is asking the government to make an investment in tourism. Precedents have been set by the Prime Minister, who invested in tourism even while other budgets of significance were cut.

Precedents have also been set in the U.S. New Jersey increased its tourism marketing budget by 60 percent, and the state government is now reaping the tax receipt benefits. For every dollar the government invests in tourism marketing, it receives $14.40 in taxes.

Here is a quick review of the marketing approach of the proposed corporation:

The Canadian Tourism Commission is positioning Canada internationally as: "The World Needs More Canada." Within this umbrella brand tag line, it is proposed that the Corporation will create a framework for regional and sectoral sales, tapping niche potential for both horizontal and vertical partnership linkages to the CTC.

It also is proposed that the Corporation will facilitate the development of traditional and non-traditional regional, cross-regional, and sectoral marketing partnerships for packages, editorial articles, and media buys for niche markets.

Strategic regional -- U.S./ Europe/Asia -- marketing partnerships with the CTC will link the regions' images and themes into the CTC's umbrella brand for the overseas markets.

CONCLUSION
There is a strong case to be made that the tourism industry can play a more important role in Ontario's economic well-being, especially through the creation of more jobs. This would be done by having the industry play a more important role in its own destiny.

What is needed is effective marketing -- positioning and partnerships, both traditional and non-traditional.

To develop the kind of sales-oriented marketing programs that sell packaged tourism experiences with themes and meaning, a new approach us needed -- a public/private sector partnership in a new business-driven, tourism marketing corporation.

The result will be a more efficient, pro-active industry focused on attracting a greater share of the world's visitors to Canada, a country the United Nations has once again declared to be the best place on earth to live.

ABOUT THE AUTHOR

MICHAEL JOHN BECKLEY is President and Chief Operating Officer of Commonwealth Hospitality Ltd., which operates hotels in Canada and Cuba.

He was recently appointed Chair of the Ontario Tourism Council and also chaired the Tourism Sectoral Strategy Project undertaken for the Government of Ontario. Beckley is a founding member and former Chairman of Experience Canada, a private sector initiative to promote business and leisure travel.